Price is the deciding factor for many young adults who are purchasing their first home.

This isn’t necessarily a bad thing; but you actually risk taking a financial hit when you fixate solely on what you think you can afford, said BMO mortgage specialist Laura Parsons.

“Millennials tend to migrate to affordability instead of understanding their options,” said Parsons, who has more than 30 years of mortgage experience.

“So many people miss out on maximizing their buying power and get bulldozed in the process.”

“So many people miss out on maximizing their buying power and get bulldozed in the process.”

Parsons said the best way to get the most value when purchasing your first home is by taking advantage of three government and mortgage insurers programs: first-time homebuyers’ tax credit, homebuyers’ plan and purchase plus improvement.

“About 80 per cent of first-time homebuyers miss out on the first-time homebuyers’ tax credit,” said Parsons. “The biggest hang up is that people do not know about these programs, which has a huge impact
on affordability.”

First-time homebuyers’ tax credit

Introduced by the federal government in 2009, the program provides up to a $750 tax credit to those purchasing their first home.

Homebuyers’ plan

A recent BMO survey found that 65 per cent of millennials who are saving for their first home receive financial support from their parents.

But Parsons said many young adults are not guided on how to invest mom and dad’s chunk of money to fully maximize the homebuyers’ plan.

Financial gifts, along with personal savings for a down payment, should go into an RRSP, which homebuyers can then withdrawal from (up to $25,000) for a down payment using the homebuyers’ plan. Homeowners typically have 15 years to repay that amount back into their RRSP.

Purchase plus improvement

Mortgage insurers such as Genworth Canada and Canada Mortgage and Housing Corp. (CMHC) allow homebuyers to build renovation costs into their mortgage – making for one manageable loan.

“You may be approved for ‘X,’ but then I’d tell you to go find something lower than that and we’ll work the costs of renovations into your financing,” said Parsons.